Beyond the Welfare State

All over the developed world, nations are coming to terms with the fact that the social-democratic welfare state is turning out to be untenable. The reason is partly institutional: The administrative state is dismally inefficient and unresponsive, and therefore ill-suited to our age of endless choice and variety. The reason is also partly cultural and moral: The attempt to rescue the citizen from the burdens of responsibility has undermined the family, self-reliance, and self-government. But, in practice, it is above all fiscal: The welfare state has turned out to be unaffordable, dependent as it is upon dubious economics and the demographic model of a bygone era. Sustaining existing programs of social insurance, let alone continuing to build new ones on the social-democratic model, has become increasingly difficult in recent years, and projections for the coming decades paint an impossibly grim and baleful picture. There is simply no way that Europe, Japan, or America can actually go where the economists' long-term charts now point — to debts that utterly overwhelm their productive capacities, governments that do almost nothing but support the elderly, and economies with no room for dynamism, for growth, or for youth. Some change must come, and so it will.

But fully grasping this reality will not be easy. Our attachment to the social-democratic vision means that we tend to equate its exhaustion with our own exhaustion, and so to fall into a most un-American melancholy. On the left, fear of decline is now answered only with false hope that the dream may yet be saved through clever tinkering at the edges. On the right, the coming collapse of the liberal welfare state brings calls for austerity — for less of the same — which only highlight the degree to which conservatives, too, are stuck in the social-democratic mindset.

The essay describes President Obama as "intelligent," which some may disagree with. And it's a long piece. There are some specific policy proposals at the end on taxes, health care and entitlements. On taxes, Mr. Levin would keep the tax exemption for retirement savings, a unified child tax credit, and a charitable-giving deduction, but get rid of the other deductions in exchange for lower rates. On entitlements, he advises means-testing "essentially all government benefits," while grandfathering in those who are retired or almost retired today. He advises that "Means-testing should, to the extent possible, be designed to avoid discouraging saving and work." (Good luck with that one.) There's a good amount of wisdom in there worth thinking about though.